The market supply and demand functions for a good traded on a perfectly competitive market are:
$$Q D = 50 - 0.5 P \text { and } Q S = 10 + 1.5 P$$ (i)What is the equilibrium price and quantity on this market?
(ii)If the production of each unit of this good gives rise to a social cost of $4, what is the socially optimal equilibrium quantity and price? Assume that producers pay a tax of $4 per unit.
(iii)If the production of each unit of this good gives rise to a social benefit of $8, what is the socially optimal equilibrium quantity and price? Assume that producers receive a subsidy of $8 per unit.

Question

The market supply and demand functions for a good traded on a perfectly competitive market are:
 $$Q D = 50 - 0.5 P \text { and } Q S = 10 + 1.5 P$$ (i)What is the equilibrium price and quantity on this market?
(ii)If the production of each unit of this good gives rise to a social cost of $4, what is the socially optimal equilibrium quantity and price? Assume that producers pay a tax of $4 per unit.
(iii)If the production of each unit of this good gives rise to a social benefit of $8, what is the socially optimal equilibrium quantity and price? Assume that producers receive a subsidy of $8 per unit.

Quizplus · Accepted Answer

The Answer of The market supply and demand functions for a good traded on a perfectly competitive market are:
 $$Q D = 50 - 0.5 P \text { and } Q S = 10 + 1.5 P$$ (i)What is the equilibrium price and quantity on this market?
(ii)If the production of each unit of this good gives rise to a social cost of $4, what is the socially optimal equilibrium quantity and price? Assume that producers pay a tax of $4 per unit.
(iii)If the production of each unit of this good gives rise to a social benefit of $8, what is the socially optimal equilibrium quantity and price? Assume that producers receive a subsidy of $8 per unit.

The Market Supply and Demand Functions for a Good Traded QD=50−0.5P and QS=10+1.5PQ D = 50 - 0.5 P \text { and } Q S = 10 + 1.5 PQD=50−0.5P and QS=10+1.5P

The Market Supply and Demand Functions for a Good Traded $Q D = 50 - 0.5 P \text { and } Q S = 10 + 1.5 P$